Reading your article, there appears to be a penalty for years not worked up to age 65. I plan to wait until age 72 to start my pension. Can you, in a complementary article, clarify this penalty in figures? I will be 60 in May, I have a decision to make.
GL
So, if I stop working at age 60, live with my RRSP and TFSA until age 70 and only apply for my QPP at age 70, I will be penalized because I will have years without employer income, from 60 to 65 years old? Any sense !
M.B.
When Retraite Québec calculates your pension, it does not take into account certain periods during which your income was low or zero, up to a maximum of 15% of the total income you earned during your career. This corresponds to 7 years of work. Therefore, the years during which you will not work, from age 60 to 65, will not necessarily affect your retirement pension negatively.
In addition, from age 65, your pension is protected. This therefore means that the years between your 65th birthday and the time when you apply for your pension will also not be taken into account in the calculation if they disadvantage you.
Two other factors increase the amount of your pension:
- Each month of waiting before applying for your pension causes it to increase by 0.5% to 0.6% before age 65 and by 0.7% after age 65.
- When you apply for your pension, your income is converted into today’s dollars to perform the calculation. So you don’t lose your purchasing power.
Delaying the moment to apply for your pension is advantageous because you benefit from the fact that it increases over time and increases in value.
My spouse worked as long as possible (67 years) so that the amount of his QPP would be higher when he retired. According to his belief and the information he had received, if he died, I would have almost the same amount. He died last August and the amount of pension I receive is barely 10% of the amount of pension he received. This situation is major for me.
M.C.
A beneficiary of a retirement pension whose spouse dies will receive a second pension: that of the surviving spouse. However, these two combined pensions cannot exceed a maximum amount. This amount corresponds to the maximum retirement pension that the beneficiary could receive based on the age at which he requested it.
So, in the present situation, we can assume that Mme C. was already receiving, before the death of her spouse, an amount of retirement pension almost equivalent to the maximum to which she is entitled; This is why when you combine your retirement pension and your surviving spouse’s pension, the amount increases to the maximum amount, which gives an increase, in this case, of only around 10%.
What are the calculations for self-employed workers who must pay the employer’s share, therefore double, to know if it is preferable to continue contributing after age 65?
M.P.
I am over 65 and have not yet applied for the RRQ. Isn’t it obvious that since I pay double (self-employed), it would be much less advantageous for me to wait to apply for the pension?
J.D.
From a certain age, called the recovery age, the amount of benefits that a person will have received in addition to the retirement pension will become higher than the amounts paid in contributions to be entitled to these benefits . The time required for a 65-year-old person who begins to receive a retirement pension supplement to reach the recovery age is estimated at 9 years for employees and 17 years for self-employed workers.
Delaying the moment to apply for your pension generally remains advantageous, but a person who is self-employed takes longer than an employed person to “recover their money”. Indeed, given that a person who is self-employed pays both parts of the contribution, they reach the break-even threshold for their contribution less quickly than an employed person.
However, if you have a high life expectancy, particularly based on your state of health, it could be advantageous for you to continue to delay the moment you apply for your retirement pension. Since each person’s situation is unique, it is always preferable to have a financial planner support you in your thinking.
What happens to a state employee (RREGOP and others) if I decide to wait to take the RRQ benefit until age 72? Will my RREGOP amount still be reduced at age 65 until age 72? If I wait until age 72 before claiming my QPP benefit, will the RREGOP amount be reduced with the new benefit amount?
R.G.
The amount of the RREGOP pension is not influenced by the amount of the QPP retirement pension, regardless of when you request to receive your QPP retirement pension.
If you start receiving your RREGOP pension at age 60, it will be in the amount X until you are 65. From the age of 65, this amount will decrease, as provided by the RREGOP; This is called coordination with the RRQ. The RREGOP provides for this coordination since when you turn 65, you have access to public plans, such as the RRQ. Until your death, you will receive the same amount from the RREGOP, regardless of when you request your RRQ pension.
The longer you wait to apply for your QPP pension, the more it will increase. The same applies to all beneficiaries, whether they receive an RREGOP pension or not. Therefore, even if you apply for your QPP retirement pension at age 72, your RREGOP pension will not decrease any further.